Thoughts After the September 29 TSX Crash

Issue: 
September-October 2008

THE HEADLINES ON TUESDAY, SEPTMBER 30, 2008 were all focused on the largest single one day drop of the TSX, 840 points or 6.93% which occurred on the 29th. On the same day everyone was talking about the headlines, the TSX gained back 467 points or 4.15% – but without all the headlines. Where will the markets be next week or next year, who knows?

For the majority of us, we are not day traders. Our investment timelines are not 30 minutes or 30 days, they are 30 years. Short term drops in the market are not always the bearer of bad news.

Investing is emotional – in good times and bad. For those taking a proactive approach, correcting markets like these are a great time to get a second opinion on past asset allocation decisions. Even investors who have followed the key principles of investing – asset allocation, dollar cost averaging and using conservative return assumptions – are vulnerable to their negative reactions. In many instances, investors become convinced their own holdings are not performing as they want, unaware that prudent decisions they made in the past are now making a difference to their investments.

During these critical times, good financial security advice makes the difference between investor success and failure. You need to keep focused on the long-term reasons as to why your plan was created and your long term goals. By asking some basic questions you can ensure your investments are working for you:

1) Has your level of investment risk changed?
2) Does your investment plan have the proper performance expectations built into it?
3) Does your portfolio need to be rebalanced?
4) Are you still reinvesting in the plan?

The current outlook for the short term markets is continued volatility as the markets react to every piece of news on a global basis. Sticking to a well diversified portfolio and long-term investment strategy will help mitigate volatility. The short term highs and lows will always happen but keeping the long-term approach will be a much more comfortable approach to achieving your financial goals.

— Kell Sewell, 705-761-1395, Kelland.Sewell@freedom55financial.com

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